AI Chip Frenzy Drives Tool Makers to First Double-Digit Growth in 3 Quarters

The $30 trillion AI investment wave has finally reached the semiconductor industry's backbone. Global chip tool makers are set to post their first double-digit revenue growth in three quarters, as companies race to build the infrastructure for artificial intelligence.

From Netherlands to Japan: The Equipment Gold Rush

Dutch lithography giant ASML Holding expects strong revenue growth this quarter, driven by robust sales of its cutting-edge extreme ultraviolet (EUV) machines. As the world's sole supplier of EUV equipment—essential for manufacturing the most advanced AI chips—ASML sits at a unique chokepoint in the global tech supply chain.

Meanwhile, Japan's Tokyo Electron is gearing up for what it calls an AI-driven "supercycle" in memory demand. The company, which dominates critical etching and deposition equipment, reports surging orders for tools needed to produce high-bandwidth memory (HBM) chips that power AI data centers.

The Winners and Losers Emerge

Not everyone benefits equally from this equipment boom. Memory giants like Samsung and SK Hynix are the primary customers, ramping up capital expenditure to meet AI chip demand. SK Hynix, controlling 80% of the HBM market, has become particularly aggressive in equipment orders.

But here's the twist: while Asian chipmakers spend billions on new equipment, their domestic tool suppliers often can't compete. Companies like Renesas are actually sinking into the red, missing out on the AI boom despite being in the semiconductor business.

The Numbers Behind the Hype

The semiconductor equipment market is projected to reach $120 billion in 2026, up 15% from the previous year. But that headline figure masks dramatic variations: advanced AI chip tooling could see growth exceeding 25%, while legacy equipment faces pricing pressure from Chinese competitors.

Taiwan Semiconductor Manufacturing Company (TSMC) is turning Japan into its third advanced chip production base, signaling just how seriously the world's largest contract manufacturer takes AI demand. The company's Japanese expansion represents billions in equipment orders for local suppliers.

Supply Crunch Creates Unexpected Ripples

China's largest chipmaker SMIC warns the industry is in "crisis mode" over memory shortages. This scarcity is forcing unexpected alliances: PC makers HP, Dell, Acer, and Asus are considering Chinese memory chips to fill supply gaps—a move that would have been unthinkable just years ago.

The memory crunch is creating a feedback loop: shortages drive higher prices, which justify more equipment investment, which creates more demand for the tools that make the tools. It's a classic industrial virtuous cycle, assuming demand holds.

The Geopolitical Equipment Game

Behind these rosy growth numbers lies a complex geopolitical chess match. ASML's EUV machines can't be sold to China due to export restrictions, creating artificial scarcity that benefits the company's pricing power. Meanwhile, Chinese tool makers are rapidly improving, threatening the dominance of established players in less advanced segments.

This dynamic raises questions about the sustainability of current growth rates. What happens when China develops its own advanced equipment capabilities? Or when AI chip demand eventually plateaus?